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Ohio Rules of Professional Conduct

Comment - 1.17

[1] The
practice of law is a profession, not merely a business. Clients are
not commodities that can be purchased and sold at will. Pursuant to
this rule, when a lawyer or an entire firm ceases to practice, and
other lawyers or firms take over the representation, the selling
lawyer or firm may obtain compensation for the reasonable value of
the practice as may withdrawing partners of law firms. See Rules 5.4
and 5.6. A sale of a law practice is prohibited where the purchasing
lawyer does not intend to engage in the practice of law but is buying
the practice for the purpose of reselling the practice to another
lawyer or law firm.

[2] [RESERVED]

[3] The purchasing and selling lawyer may agree to a reasonable
limitation on the selling lawyer’s ability to reenter the
practice of law following consummation of the sale. These
limitations may preclude the selling lawyer from engaging in the
practice of law for a specific period of time or in a defined
geographical area, or both. However, the sale agreement may not
include such limitations if the selling lawyer is selling his
practice to enter academic service, assume employment as a lawyer on
the staff of a public agency or a legal services entity that provides
legal services to the poor, or as in-house counsel to a business.

[4] [RESERVED]

[5] [RESERVED]

Sale
of Entire Practice

[6] The
rule requires that the seller’s entire practice, be sold. This requirement protects those clients whose matters are
less lucrative and who might find it difficult to secure other
counsel if a sale could be limited to substantial fee-generating
matters. The purchasers are required to undertake all client matters
in the practice, subject to conflict clearance, client consent, and
the purchasing lawyer’s competence to assume representation in
those matters. This requirement is satisfied even if a purchaser is
unable to undertake a particular client matter because of a conflict
of interest or if the seller, in good faith, makes the entire
practice available for sale to the purchasers. The fact that a
number of the seller’s clients decide not to be represented by
the purchasers but take their matters elsewhere, therefore, does not
result in a violation. Pursuant to Rule 1.1, the purchasing lawyer
may be required to associate with other counsel in order to provide
competent representation.

Client
Confidences, Consent, and Notice

[7] Negotiations between seller and prospective purchaser prior to
disclosure of information relating to a specific representation of an
identifiable client no more violate the confidentiality provisions of
Rule 1.6 than do preliminary discussions concerning the possible
association of another lawyer or mergers between firms, with respect
to which client consent is not required. However, providing the
purchaser access to client-specific information relating to the
representation and to the file requires the purchaser and seller to
take steps to ensure confidentiality of information related to the
representation. The rule provides that before such information can
be disclosed by the seller to the purchaser, the purchaser and seller
must enter into a confidentiality agreement that binds the purchaser
to preserve information related to the representation in a manner
consistent with Rule 1.6. This agreement binds the purchaser as if
the seller’s clients were clients of the purchaser and
regardless of whether the sale is eventually consummated by the
parties. After the confidentiality agreement has been signed and
before the prospective purchaser reviews client-specific information,
a conflict check should be completed to assure that the prospective
purchaser does not review client-specific information concerning a
client whom the prospective purchaser cannot represent because of a
conflict of interest.

[7A] Before a sale is completed, written notice of the proposed sale
must be provided to the clients of the selling lawyer whose matters
are included within the scope of the proposed sale. The notice must
be provided jointly by the selling and purchasing lawyers, except
where the seller is the estate or representative of a deceased,
disabled, or disappeared lawyer, in which case the notice is provided
by the purchaser. At a minimum, the notice must include information
about the proposed sale and the purchasing lawyer that will allow
each client to make an informed decision regarding consent to the
sale. A client may elect to opt out of the sale and seek other
representation. However, consent is presumed if the client does not
object or take other action within ninety days of receiving the
notice of the proposed sale.

[8] A lawyer or law firm ceasing to practice cannot be required to
remain in practice because some clients cannot be given actual notice
of the proposed purchase. Since these clients cannot themselves
consent to the purchase or direct any other disposition of their
files, the rule requires the parties to provide notice of the
proposed sale via a newspaper publication.

[9] All elements of client autonomy, including the client’s
absolute right to discharge a lawyer and transfer the representation
to another, survive the sale of the practice.

Fee Arrangements Between Client and Purchaser

[10] The sale may not be financed by increases in fees charged the
clients of the practice. Existing arrangements between the seller
and the client as to fees and the scope of the work must be honored
by the purchaser. However, the purchaser may negotiate new fee
agreements with clients of the seller for representation that is
undertaken after the sale is completed.

Other
Applicable Ethical Standards

[11] Lawyers participating in the sale of a law practice are subject
to the ethical standards applicable to involving another lawyer in
the representation of a client. These include, for example, the
seller’s obligation to exercise competence in identifying a
purchaser qualified to assume the practice and the purchaser’s
obligation to undertake the representation competently (see Rule
1.1); the obligation to avoid disqualifying conflicts, and to secure
the client’s informed consent for those conflicts that can be
agreed to (see Rule 1.7 regarding conflicts and Rule 1.0(f) for the
definition of informed consent); the obligation to avoid agreements
limiting a lawyer’s liability to a client for malpractice (see
Rule 1.8(h)); and the obligation to protect information relating to
the representation (see Rules 1.6 and 1.9).

[12] If approval of the substitution of the purchasing lawyer for
the selling lawyer is required by the rules of any tribunal in which
a matter is pending, such approval must be obtained before the matter
can be included in the sale (see Rule 1.16).

Applicability
of the Rule

[13] This rule applies to the sale of a law practice of a deceased,
disabled, or disappeared lawyer. Thus, the seller may be represented
by a nonlawyer representative not subject to these rules. Since,
however, no lawyer may participate in a sale of a law practice that
does not conform to the requirements of this rule, the
representatives of the seller as well as the purchasing lawyer can be
expected to see to it that they are met.

[14] Admission to or retirement from a law partnership or
professional association, retirement plans, and similar arrangements,
and a sale of tangible assets of a law practice, do not constitute a
sale or purchase governed by this rule.

[15] This rule does not apply to the transfers of legal
representation between lawyers when such transfers are unrelated to
the sale of a practice.

[16] The purchaser can not continue to use the seller’s name
unless the seller is deceased, disabled, or retired pursuant to Rule
VI of the Supreme Court Rules for the Government of the Bar of Ohio.

Comparison to former Ohio Code of Professional Responsibility

Rule
1.17 restates the existing provisions of DR 2-111, substituting
“information relating to the representation” in place of
“confidences and secrets.”

Although
there is little textual similarity between Rule 1.17 and the ABA
Model Rule, most of the substantive provisions of the Model Rule are
incorporated into the rule, with the major exceptions being that Rule
1.17 (1) does not permit the sale of only a portion of a law
practice, and (2) allows a missing client to be provided notice of
the proposed sale by publication. The comments are modified to track
the rule and Ohio law.

Comment
[1] is modified to clearly indicate that the provisions of the rule
are not intended to permit sale to a lawyer who will merely act as a
“broker” and resell the practice.

Comment
[2] is relocated to Comment [6] where the language of the Model Rule
comment is revised to address the unanticipated return to practice of
the selling lawyer. The latter modification is deemed unnecessary
due to the prohibition in division (d)(3) directing that the sale
agreement may not restrict the ability of the selling lawyer to
reenter the practice if the sale is the result of the lawyer selling
the practice “to enter academic, government, or public service
or to serve as in-house counsel to a business” and the
commentary contained in Comment [3].

Comments
[4] and [5] are deleted, and comments [6], [9], and [15] are
modified, to reflect the fact that Rule 1.17 does not permit the sale
of a part of a lawyer’s practice.

Comments
[7] and [7A] are modified to reflect the actual mechanisms contained
in the rule respecting the preservation of information related to the
representation of clients.

Comment
[10] is clarified to indicate that new fee arrangements may be
negotiated with clients after the sale of a law practice “for
representation that is undertaken after the sale is completed.”

Comment
[11] is modified to specifically ensure that the parties to the sale
of a law practice understand that the sale may not limit the
liability of either the buyer or the seller for malpractice.

Comment
[16] is added to give notice to prospective purchasers that it is
improper to utilize the seller’s name in the practice unless
the seller is deceased, disabled, or retired pursuant to Gov. Bar R.
VI.